What Was The Glass-Steagall Act?
In the wake of the Great Depression the Glass-Steagall Act (GSA) separated investment and commercial banking activities. It was enacted in 1933 due to "improper banking activity," or what was considered overzealous commercial bank involvement in stock market investment, was deemed the main culprit of the financial crash
In 1999 Bill Clinton repealed GSA. He could have vetoed the bill to repeal Glass-Steagall without the concern of a Republican override - they did not have the votes without Democrat support.
“three reasonable arguments” for tying Glass-Steagall repeal to the financial crisis: (1) it invited banks to enter risks they did not understand; (2) it created “network integration” that increased contagion; and (3) it joined the incompatible businesses of commercial and investment banking.
The Obama Administration has been criticized for opposing Glass-Steagall reenactment. Treasury Secretary Timothy Geithner testified to the Joint Economic Committee that he opposed reenacting Glass-Steagall and that he did not believe “the end of Glass-Steagall played a significant role” in causing the financial crisis. Obama administration's solution.....the extremely long, complicated and cumbersome nearly Dodd-Frank Bill which is more or less an overzealous Glass Stegall Act of which only about 30% of the law's provisions have come into effect, even as the statute itself has metastasized into 8,843 pages of complex, loop-hole ridden rules.
Why reinvent the wheel that worked for 66 years when a simple reenactment of Glass Stegall can offer an immediate and proven solution?
The case law yet to be litigated in the interpretation of Dodd-Frank Bill will only hinder the progress of America's financial recovery...it is a "better than nothing bill". Why settle for a complex bill that is only 30% implemented when Glass-Stegall has a proven track record and 66 years of history in the making?
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